The Morning Call
1/25/19
The
Market
Technical
The Averages
(DJIA 24533, S&P 2642) turned in a mixed performance (Dow down, S&P
up). Both Averages remain below both
MA’s and are in short term trading ranges.
However, the pin action of the last couple of days suggests that they
are building support at the 61.8% Fibonacci retracement level.
Volume declined;
breadth improved and is getting into overbought territory.
The VIX fell another
3 %. While it ended above its 200 DMA
and in a short term uptrend, it finished below its 100 DMA; now support, if it
remains there through the close on Monday, it will revert to resistance.
The long bond was
up ½%, ending above both MA’s, in short and intermediate-term trading ranges,
in a very short-term uptrend and above its last prior higher low.
The dollar rose ½%,
closing above both MA’s, in a short-term uptrend and within that mid-November
to present consolidation phase.
GLD declined
fractionally, but ended well above both MA’s, within a very short-term uptrend
and within a short-term trading range---a healthy chart.
Bottom line: the Averages seem to be building
a base at that 61.8% Fibonacci retracement level. Though they are so overbought right now, at least
more backing and filling seems likely. It is also somewhat bothersome that the VIX
still has a relatively positive chart (an indicator of potential negative
equity pin action) and the dollar, long bond and gold are performing like
safety trades.
The
calendar effects of pre-election years.
Thursday
in the charts.
Fundamental
Headlines
Yesterday’s
US stats were upbeat: weekly jobless claims fell; the January flash composite
and manufacturing PMI’s were better than expected while the services PMI was in
line; the January Kansas City Fed manufacturing index was above estimates; the
December leading economic indicators were in line but declined; and the Fed
continued to allow the run off its balance sheet.
Overseas,
the numbers were abysmal: January EU
consumer confidence came in at -7.9 versus estimates of -6.5 while the January
EU flash composite, manufacturing and services PMI’s were worse than
anticipated; the January Japanese flash manufacturing PMI was less than
forecast.
Out
there in the ruling class fantasy camp:
Commerce
Secretary Ross says that the US and China are miles apart on any trade agreement.
Draghi downgraded ECB’s
outlook for EU economy.
And
the senate failed to pass either version of a bill to reopen the government.
Bottom line: I didn’t see
much positive in yesterday’s new flow.
But maybe the bad news is already discounted. Or investors are tip toeing through the
tulips. Certainly, the technicals are supporting
one or the other scenario---valuations notwithstanding.
My assumption is
that, short term, the indices will push toward their prior high. How high is the $64,000 question. However, higher equities will be that much
more overvalued.
Why
you need to be diversified now.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
January US flash composite PMI came in at 54.5 versus estimates of 54.2; the
manufacturing PMI was 54.9 versus 53.5 and the services PMI was 54.2, in line.
The
December leading economic indicator fell 0.1%, in line.
The
January Kansas City Fed manufacturing index was reported at 5 versus forecasts
of 2.
International
Other
What
I am reading today
Friday morning humor.
The
world economy and atmospheric carbon dioxide.
Why everyone seems to
have more money than you.
Why facts don’t change
our minds.
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for Survival’s website (http://investingforsurvival.com/home)
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